B2B Turbulence Management
In the Commercial Law numbered 18/2, the adjective “prudent” is used for a business person. According to the Turkish Language Association, the word “Prudent” means “ability to see the truth without being mistaken”, “sense”, “vision” and “understanding”. In other words, a business person should make prudent decisions regardless of the market, credit, and job market situation.
Investment returns can be calculated and when ROI targets are met, if we think like a trader in investment; we should be in “Long”, on the other hand, in cases of volatility and turbulence, we should be in cash, that is, in “Short”.
Long:
In a calm sea, everyone is a captain. In other words, when the market and credit conditions are appropriate it is sufficient to ensure that only long-term debts are covered by capital (including profit) and short-term debts are covered by current assets.
If we open the provision of long-term debts with capital, the sum of the profits arising from the capital plus investment must cover the investments made and leave an acceptable profit. Put in a nutshell; the investment composition should be, as prudent traders do: 50 % capital, 50 % debt. (Long Term Debts / Capital <2)
Short:
Being in the “Short” during periods of turbulence, that is, downsizing and shrinking, is necessary to reduce the possible damage. Prudent investments will make it easier to manage periods of turbulence and ensure that downsizing remains limited.
Being in the “Short” includes the following precautions:
- Minimum Stock Management,
- Backdating the receivables,
- Extending Commercial Debts as much as possible without delay interest and without FX risk,
- Decreasing of Short and Long Term debts,
- Sale of inert and technologically low capacities (Investments),
- Re-Organization (Lean Management),
- Review of loss-making products /business lines, exit from non-strategic customers /business lines and products.
And the real captain is the one who brings his ship to the port on a choppy sea.
